Concerns raised after Capital Gains Tax not lowered for residential property
- 24th March 2016
- Buy-To-Let Property News
Chancellor needs to stop discriminating against buy-to-let sector as it is vital in filling the UK's housing gap
George Osborne’s decision not to lower Capital Gains Tax on residential property has raised concerns that the amount of available second hand stock coming onto the market could suffer.
The Chancellor announced in the Spring 2016 Budget that while broadly the higher and lower rates of Capital Gains Tax will be reduced from 28% to 20% and from 18% to 10% respectively, the 28% and 18% rates will continue to apply for residential property. An individual’s main home will remain exempt from Capital Gains Tax under Private Residence Relief.
UK landlords and property commentators say that this decision will make residential property a more illiquid asset than other assets, as investors will delay selling in the hope that CGT on residential property may eventually fall. With fewer houses up for sale, there may be increased price volatility in the market.
It is important that the Government listens to the concerns of property investors and does not dissuade investment in the buy-to-let market. Landlords play a vital role in the UK rental market, maintaining a high standard of rental property on the market and boosting much needed labour mobility in the country.
Stephen Ludlow, Chairman at ludlowthompson, comments: “If the Government dissuades property investors from selling their property due to high taxes, the broader housing market may suffer.
“By not lowering capital gains tax for residential property, the Government risks contradicting their aim of increasing available housing stock across the UK.
“By disincentivising sales, house prices may be pushed up and an asset bubble could grow.
"Of course, we can only surmise what the Chancellor's decision to keep the Capital Gains tax the same will have on the market, but with rents rising and returns remaining strong, the overall demand for property from buy-to-let investors is unlikely to diminish anytime soon."
If the Government dissuades property investors from selling their property due to high taxes, the broader housing market may suffer
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